Payday Loan Yes or No?
We recently got a question about whether to take a pay day loan. I’ve only just recently written about it here on the blog, but I was pleased to be asked to think more about systems like fast loans and online payday loans as a way for the average person to tide themselves or family over a rough patch.
So the question to ask is payday loan — yes or no? I will share my opinion and I would love to hear what readers think. If any of you have used a loan service like this — a payday loan service — I’d would be interested to see what your experience was. I have not used one before and so my perspective is naturally going to be skewed. I like to think I’m a practical person and when I think back to my troubled years when money was something to stress about, I know in my heart that I would have taken a payday loan if I had to.
In my late 20s I certainly turned to family and took a loan from my mom. It got me out of a bind, but I never felt right about it. I know she probably never thought she’d get the money back and she did die before I could repay her, but I could repay her now, with interest, several times over and I wish she were here to know that. So it is no shame to find yourself in a bind. The question is what are your options and how do you move forward thinking about future situations.
So first, the setup. You wouldn’t be thinking of a fast cash loan if things weren’t dire. Or, hopefully you wouldn’t be considering 
If you are facing something as big as losing the house, a payday loan is not really an answer, is it? Have you fully explored the options with the mortgage lender? These days they are pretty overloaded with folks in your situation, but it never hurts to ask. And in many cases you have to be behind on your payments by as much as six months before they will even talk to you. So if you are in that sort of a situation, just stop paying on the mortgage and pile up the cash you would have spent on the mortgage. You will need an emergency fund and if you don’t have one, now is the time to create one!
For something smaller, the electric bill or buying groceries, the question is always one of scale. Is a faxless payday loan the way to go about getting the money? How much do you really need? You could check with your church or the local food bank for groceries. Do not feel ashamed to be in this situation. It is shame that will keep you in the cycle. If you tell friends and family the truth, they can help. It is probably best if you don’t expect monetary help from them, but they can be a source of comfort, support and information. 
By telling the people in your life about your financial struggle, you also free yourself from the chains of acting prosperous. Are you driving a new or fairly new car? How much is that hurting you each month? Car payments are a huge problem for the working poor. On average, a monthly car payment is 30% of a middle class or lower middle class take home pay and that is way too high. Your car payment should be a modest 10% or, at most, 15% of your monthly expenses. If you can look at your financial situation truthfully — if you didn’t have the car payment, where would you be financially?
Of course it is not like you can dump your car overnight and get a cheaper one. So you might still be faced with the payday loans question. The easy answer (as I told Cindy, the reader who asked) is this: do what you have to do to get over this immediate crisis. And I do mean immediate. Once the lights are back on or the pantry is stocked up, then you can sit down and tackle the hard questions of what to do with your financial life. Do you have a debt problem or an income problem, or both? In other words — you are spending too much, not making enough or doing both things at once. It is pretty common. And once you are past the immediate crisis, you can look hard at your money skills. But you have to be past the critical point, however. It is like you can’t drive the car and fix the flat at the same time. Get the loan and then do whatever is necessary to never, ever be in this position again.
